Global M and A: Fill in the Blanks

"...The previous top of 1999-2000 feels more like false memory syndrome
than a warning from history..."

GOT TIME for a quick round of Blankety Blank, the classic British
gameshow from the '80s?

If you were lucky enough to miss it, just think of America's Match Game -
only with the value of prizes capped by government diktat. (Yes, really...)
Then simply write down the word that best completes these well-worn phrases
below.

"European stocks set new 6-year high on BLANK," reports Reuters. "FTSE ticks
down on oils; BLANK supports."

"Stent failure a crack in BLANK for J&J," according to the Wall Street
Journal. "Lawyers win in European BLANK banking battle," adds a note
on its legal blog.

"Canada's Dollar climbs to 11-month high amid BLANK optimism," reports Bloomberg.
Nearly 600 Canadian companies have now been subject to foreign BLANK since
the start of last year, it goes on. The newswire itself has published 15 stories
about global "BLANK" pushing asset prices higher in the last week alone.

Okay, let's reveal the legend. "Global mergers and acquisitions volumes leapt
over the $2,000bn mark on Monday," reports James Politi for the Financial
Times in New York, "as the pace of corporate deal-making in 2007 continued
to exceed even the rosiest predictions on Wall Street and in the City of London."

In short, M&A is the missing blank in any review, preview or analysis
of today's financial markets. Buying up an entire listed company...and any
listed company will do, it seems...is the only game left after six years of
easy money worldwide.

According to Dealogic, the financial consultancy, M&A activity since the
start of 2007 has outpaced the same period in 2006 by nearly two-thirds. March
this year was the busiest month in history - right up until April got started.
The previous top for M&A spending was the DotCom Bubble of 1999-2000. But
now that feels more like false memory syndrome than a warning from history.

"The [global] boom in transactions is being driven by a combination of cheap
debt to finance acquisitions, a benign antitrust environment, particularly
in the US, and globalisation, which is forcing companies to reassess their
competitiveness and their mix of businesses," says the FT.

Hence Alcoa bidding for Alcan to create the world's largest aluminum firm.
Alcoa itself "could become merger prey," adds the Wall Street Journal, just
in case a fresh M&A rumor has passed it by. Merrill Lynch says private
equity might be set to buy BHP Billiton, the world's largest mining group.
BHP itself could now be preparing a bid for Rio Tinto, according to the latest
rumours. Thomson, the newswire service, is bidding £8.8 billion for Reuters
- a 42% premium to Reuters share price of only four days ago. ABN Amro, the
under-performing Dutch investment bank, has now got so many suitors, it's using
the courts to scuttle fresh bids unless they add a couple of billion to their
offer.

"Doubts remain about the sustainability of the global M&A boom," warns
the FT darkly, "particularly if fears of a sharp slowdown in the US economy
were to materialize."

But aspirations for strong US growth are NOT what's underpinning this historic
bubble in corporate activity. Even investment bankers know that elephants don't
gallop; yet the size of corporate takeovers has grown as their number has slipped
- down more than 21% in Europe so far this year, and down by nearly one-quarter
in the United States. Instead, it's simply a case of money making money, as
ever.

Anyone's money will do, just so long as there's plenty of it. That's why the
busiest sector by far is financial services, witness to $410.6 billion of equity
changing hands in corporate deals - nearly twice the spend in energy, the next
busiest sector. Indeed, the financial services sector is both leading and driving
this bull market as Citigroup has beaten Goldman Sachs, last year's winner,
for the title of No.1 corporate adviser so far in 2007. It's outstripped the
value of J.P.Morgan's deals - the second busiest corporate deal maker - by
around 7% at $586 billion since January.

What's at stake goes far beyond a few measly basis points on the cost of borrowing.
Look at Lazard, for example. So far this financial year it's restructured New
Century Financial, the failed subprime mortgage lender; advised on Barclays
attempt to merge with ABN Amro for $91.3 billion - the "largest bank merger
with ABN in history"; overseen €43.7 billion in the Endesa deal; helped
set up the biggest ever leveraged buy-out, selling TXU to a private-equity
group for $45 billion; advised on Mellon Financial's $16.5 billion merger with
the Bank of New York...KeySpan's $11.8 billion sale to National Grid...the
Chicago Board of Trade's plans to merge plus American Standard's plans to separate
out its businesses...

...and STILL the poor investment bank comes way down the table
of Wall Street rainmakers!

Lazard's financial advisory division accounts for more than half its top-line
profits. But revenues were barely changed during the first quarter. Morgan
Stanley, meantime, achieved a 10% rise. Goldman Sachs grew its advisory revenues
by 17%.

Lazard shareholders worried their investment isn't performing can no doubt
take comfort in the hope of a predatory offer. For just as in the classic TV
gameshow, losers in today's Blankety Blank financial markets never go away
empty handed.

The twist in 2007, however, is that their consolation prize - a free Blankety
Blank Chequebook and Pen - can now be used to buy more financial assets in
fresh M&A deals. The true value of productive enterprises might not be
improved; it may even be put at risk.

Formerly City correspondent for The Daily Reckoning in London and head of
editorial at the UK's leading financial advisory for private investors, Adrian
Ash is the head of research at BullionVault,
where you can buy gold
today vaulted in Zurich on $3 spreads and 0.8% dealing fees.

About BullionVault

BullionVault is the
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Please Note: This article is to inform your thinking, not lead it.
Only you can decide the best place for your money, and any decision you make
will put your money at risk. Information or data included here may have already
been overtaken by events - and must be verified elsewhere - should you choose
to act on it.